The pharmaceutical industry is increasingly using biomarkers in clinical trials in order to determine if new drug candidates are displaying the expected pharmacological properties and to give early indications if they are showing efficacy or unexpected toxicity. This is especially true for the development of new drug candidates for psychiatric disorders such as schizophrenia and depression, where it is imperative to understand whether the drug is reaching the brain and acting on the target. A particular challenge for biochemical biomarkers used to determine centrally mediated activity is the relative inaccessibility of the brain to direct sampling of cells or tissues. As a result, the use of biomarkers located in the cerebrospinal fluid and in close contact with the interstitial fluid of the brain has risen in prominence. Cerebrospinal fluid biomarkers allow for the analysis of biochemical changes that reflect pharmacological activity or that may be related to the disease. In the area of psychiatric disorders, many studies have utilized biochemical biomarkers in the cerebrospinal fluid for gaining pharmacodynamic or disease modification information. This review summarizes many of these efforts, and identifies challenges and opportunities for utilizing biomarkers for new drug candidates targeting psychiatric disorders.